Due to massive recent losses from windstorms, wildfires, floods and other disasters, some insurers no longer provide coverage in certain regions. Those that continue to write policies do so at a cost: Recent premium increases of anywhere from 5% to as much as 50% have been reported – even in areas where disasters aren’t common.
While HOA boards can’t control the weather, they can make smart choices that keep habitational insurance costs affordable. A responsible board will do whatever it can to protect their communities without overpaying.
Here are seven ways to keep costs down while keeping the community’s financial interests in mind.
1. Don’t overbuy
The covenants, conditions and restricts for your community likely spells out minimum coverage. Your state might also have laws pertaining to insurance coverage.
Obviously a board should make sure the HOA has enough coverage. But it should also take care not to buy more than is needed. Read the CC&Rs and compare it with your policy, to make sure residents aren’t paying for unnecessary coverage.
2. Consider a higher deductible
The higher the deductible, the bigger the potential savings. For example, you could save 15% or more by choosing a very high deductible ($25,000 to $50,000).
Ask the agent for pros and cons, then decide if the savings would be worthwhile.
3. Update your policy info
Communities change. If the health center gets expanded or a second swimming pool is built, the policy needs to reflect these upgrades. Let your insurer know.
Make sure that replacement costs are accurate. If the policy has been renewed annually without review, it might not reflect the rise in material or labor costs in your area. This could leave the community without enough coverage, and might also result in a penalty from the insurance company.
4. Rethink smaller claims
Filing a property claim can make your insurance premium go up – and stay up, for as long as five years. Think for a minute before voting to file a small-dollar claim: Will recouping a minor loss be worth higher premiums later on?
5. Stay on top of maintenance
Cracks in a sidewalk or a bike path could lead to injury claims. Leaky plumbing can cause water damage. And so on.
Deferred maintenance saves money in the short term, but can cost you in the long run.
6. Address long-term hazards
See if your insurer offers something called "loss control engineering" – a way of evaluating potential issues in the community. An expert will observe common areas and shared buildings to report issues and suggest fixes.
For example, cutting back brush helps create “defensible space” in the event of wildfire.
7. Get quotes early – from an expert
It can take a few weeks for an insurer to prepare a quote for your community. Waiting until the last minute to ask means that the board might not have time to gather and compare multiple offers.
The bottom line
Habitational insurance and LRO insurance are very complicated. A typical insurance agent probably isn’t familiar with the ins and outs of these policies. Work with a company that specializes in community associations and commercial insurance.